SINOPEC Corp, Asia's largest refiner, agreed to form a 50-50 joint venture with its parent company to acquire US$3 billion worth of overseas oil and gas assets held by the parent to strengthen reserves and production.
Sinopec said the transaction will beef up profitability and facilitate its objective of becoming a more internationalized oil company with significant oil and gas assets, according to a statement yesterday.
Chairman Fu Chengyu is leading the asset-injection drive because, unlike its peer PetroChina Co, Sinopec lacks a sizeable upstream exploration and production portfolio, the most profitable part of the value energy chain. The refining industry in China is subject to government price controls on fuel.

"Although the deal size is relatively small compared to Sinopec's market cap of US$98 billion, we believe this upstream asset acquisition is one of many to come in the months ahead, and will certainly improve the overall profitability of the firm amid prevailing US$100-plus oil prices," Mirae Asset Securities analyst Gordon Kwan said.
The joint venture will boost Sinopec's production by 4.2 percent and reserves by 3.2 percent, according to Sanford C. Bernstein analysts. Three upstream assets from Kazakhstan, Russia and Columbia will initially be injected.
Its parent, China Petrochemical Corp, has spent nearly US$40 billion in overseas oil and gas deals since 2010, gaining access to fields ranging from Argentina and Russia to Canada, Iraq and West Africa.
Sinopec's only current overseas upstream asset is a stake in a deepwater oil field offshore Angola, acquired from its parent in 2010.
Sinopec reported yesterday net profit fell 12.8 percent to 63.9 billion yuan (US$10.27 billion) in 2012. Its refining division had an operating loss of 11.9 billion yuan, narrowing from 37.6 billion yuan in the previous year.